Thursday, October 24, 2024
Many clients ask if it’s worth it to make extra mortgage payments to pay off their home loan ahead of schedule. Here are two questions you may want to ask yourself before you make extra mortgage payments:
1 – Will I have any large upcoming expenses in the next 5-7 years?
If the answer is yes, you may want to put some money aside to cover those expenses instead of making extra payments. According to recent statistics, nearly 80% of Americans are living paycheck to paycheck. That’s a staggering number! If you have some left-over cash at the end of the month, it may be a good idea to put that money into a savings account for a rainy day. Here are some examples of large expenses you may encounter:
New roof, new appliances or other large home maintenance expenses
Caring for elderly parents or helping other family members
New car, new house, or new business opportunity
2 – Can I earn a higher rate of return by investing my extra money?
If you can invest your funds at a higher rate of return than your mortgage rate, you may want to consider doing that instead of using the funds to make extra mortgage payments. Check with your financial advisor for more detail on investment opportunities that may be worth your consideration, including retirement accounts and college savings plans.
Let me know if you have any questions, or if you’d like for me to run some mortgage numbers for your situation!
Source: CMPS Institute